Buying a life insurance policy is undeniably beneficial. It provides life cover, which will help your beneficiaries upon death, help you meet your long-term goals, and give you peace of mind. Unfortunately, many people only know the basics about life insurance policies. You need to understand more about it before buying life insurance policies. Below are the essential facts you must know about.
- How You Can Use Them
Besides benefiting your beneficiaries, specific ones like the single premium whole life give you control over your financial investment. You can access the cash and use it in emergencies. In addition, you can use it when you retire. Taking a loan is one way of doing so. You can take a loan equivalent to 90% of your insurance policy’s cash surrender value. Although doing so will decrease the death benefit, you can repay the loan to restore it to the full death benefit.
- The Earlier You Pay, the Better
Life insurance plans are considerably lower when you are younger, hence the need to buy them early. Buying it early also allows you to own it for a long time, which increases the cash benefit. In general, you need life insurance coverage as soon as you have dependents or a debt that will possibly carry on after your demise. Additionally, the chances of an insurance underwriter rejecting your policy are high when you are older and frail.
- Trumping Will
Family disputes will likely ensue upon your death, even when there is a will. If you had a close beneficiary, naming them would trump the will, protecting them from being shortchanged. However, note that some states have exceptions to this rule. For instance, some states have a revocation-upon-divorce statute that will change the beneficiary. The statute to the closest relative if you are divorced and forgot to change your spouse’s name as the beneficiary.
Life insurance policies are exempted from taxation, and the beneficiary won’t be taxed upon your death. However, there are some exceptions. For instance, if the beneficiary isn’t paid outright and the amount accrues interest, the State Department of Revenue or IRS will tax it. Life insurance is generally considered an inheritance, and the authorities above won’t tax the beneficiary upon your untimely demise.
- Medical Check
Some life insurance policies require a medical check before approval. This check is necessary, especially if you are a smoker or over 50 years old, which can make the premium higher than usual. However, you shouldn’t be worried if you are in good health regardless of age. This is because some life insurance policies favor the aged, although you must do a background check to understand the terms.
An insurance policy, like a single premium whole life, will give your beneficiary the money upon death, making it essential. Such policies can also be your investment even if you are alive since you can take a loan against the policy. However, you must understand the facts like the ones you have read here before signing the contract. Doing so will help you get the best cover and utilize the investment opportunity well.